Unrest hampers distribution, causes increased costs: Eva

NUSA DUA, Bali (JP): PT Indofood Sukses Makmur expressed concerns on Thursday over increasing political and social tension in the country, saying that it could hamper distribution of the company's products.

Indofood president Eva Riyanti Hutapea said on the sidelines of the second World Ramen (Noodle) Summit here that social unrest has penalized the company with increasing costs.

"We have no problems with the recent political developments unless there is unrest. If there is unrest, that's terrible, shops are closed, and people cannot do anything," Eva told journalists.

"When an insecure situation occurs, it's difficult to get transportation. If we want to go anywhere, we have to wait and pay a much higher price."

Eva hoped the government can finally restore security and order in the country, which has been rocked by a series of religious and ethnic-related riots.

To reduce distribution risks and costs, Eva said, the company had built noodles processing plants in 11 provinces in Sumatra, Java, Kalimantan and Sulawesi.

The chairman of the Indonesian Food and Beverage Producers Association, Thomas Darmawan, supported Indofood's argument and said the government should help the private sector to address the problem.

Thomas said the government could consider turning the National Logistics Agency (Bulog) into a profit-orientated distribution company.

Bulog's vast network and warehousing facilities would make it a competitive distribution company when managed professionally, he said.

In an uncertain situation like now, he said, producers with vast distribution networks would excel.

Indofood, therefore, would continue to dominate the domestic market until a new competitor with a better distribution network emerged, he said.

Currently some local instant noodles manufacturers are trying to emulate Indofood's distribution strategy by building plants in different places closer to the customers, he went on.

Indofood controls more than 90 percent of the domestic instant noodle market.

Distribution, nevertheless, is a delicate issue in a vast, impoverished country like Indonesia, said T. Tjeng, a delegation from China.

Bureaucratic procedures and licensing often became hurdles for distribution companies to reach all parts of the country, he said.

Indonesia, as the most efficient producer of instant noodles, could sell the products at much lower prices to consumers if distribution was smoother.

Koki Ando of the Nissin Food Co Ltd of Japan said at the opening of the noodles producers summit here that distribution would not be a problem for popular products.

Products sought after by the people would easier reach the consumers as people would automatically build their own distribution networks. Producers would need to distribute to major cities only, and people would then distribute them to remote areas.

But for products less known by the people, distribution was of prime importance for producers. They must cooperate with distributors with good networks or build their own top notch distribution systems. (rid)